LONDON (ShareCast) - Melrose Resources intends to convert the Galata field in Bulgaria to a gas storage facility next year following confirmation that it is ideally suited for conversion.

The firm’s shares rallied to their best in well over a year after the news broke. Melrose and Bulgarian state-owned gas utility Bulgargaz agreed late last year to conduct joint feasibility studies to evaluate the move.

Bulgaria’s government is backing the decision as it wants to beef up its existing gas storage capacity at Chiren with a second facility in order to comply with current European Union guidelines.

Each phase of the three stage project will cost around $30m, but should eventually increase capacity to 1.7 billion cubic metres (Bcm).

Melrose added that first production from the Kaliakra gas field discovery, made earlier this year 15km east of Galata, is expected in mid-2009 and the field will be integrated with the Galata gas storage scheme.

“Studies have yielded very positive results and the company has become more confident that the Kaliakra discovery should contain the upside reserves potential of 47 billion cubic metres (Bcf),” said the firm.

• News Channel